Slowdown in rural sales; need to watch if market bounces quickly: Emami

There has been a slowdown in rural sales in the last few weeks with migrant labourers coming back to work being one of the reasons and one needs to wait and watch whether the market bounces back quickly, according to Kolkata-based FMCG major Emami Ltd.

The company, which has embarked on project 'Khoj' in four states with a view to enhancing its rural penetration, expects to end the ongoing fiscal year by adding close to 9,000 towns and villages on its network and will shorten the 'entire coverage model' to two years instead of three years planned earlier.

"I would not shy away by saying that yes, over the last three weeks to four weeks, there has been a slight slowdown in the rural areas, and this is across the board...," Emami Ltd Executive Director Mohan Goenka told analysts in a second quarter earnings call.

When asked what could be the reason for the slowdown in rural markets, he said,"I would not be very specific on why this sudden slowdown in the last few weeks. One of the only reasons, what I say, is the migrant labourers really coming back to work...but we would have to still wait and watch whether the market bounces back quickly."

Calling for a wait and watch approach, Goenka said,"...we are entering into the peak winter season and at this point of time, we load our winter products. If winter goes well then, then we can see demand for Boroplus and other products, but yes there is a slight slowdown in the market."

Emami is also progressing with its focussed rural expansion drive under 'Project Khoj' initially targeting top four potential rural contributing states -- Uttar Pradesh, Bihar, Maharashtra and Andhra Pradesh.

"In the first half of the financial year, our rural presence was increased in an additional 5,200 towns through the Project Khoj,' Goenka said.

Elaborating on the progress, Emami President Sales Vinod Rao said the company had started it off as a pilot in four states and just to test waters using an approach of a potential based expansion versus the typical population base expansion.

"We are thoroughly encouraged with the progress. We have added close to 5,200 towns in a short period of time. We will end the year with more than 8,500 towns close to 9,000 towns and villages and we have been encouraged with this," he added.

Rao further said,"...in a direct reach sense we will maintain our stores at 9.3 lakh which include both our direct and rural footprint. With these additional 8,000 odd towns, we will add close to 45,000 stores to 50,000 stores by the end of the year."

Stating that all the company's matrices and action standards have been met, he said,"We are looking at advancing this from a three years' program to shorten the entire coverage model in two years. This is really, really helping us drive growth for rural as well.